If you’re an investor whose goals include earning a decent income from the money you have accumulated, following the Wall Street herd will cost you money: possibly a lot of money.

The investing advice you see, read or are told may not be well aligned with your long-term goals and success. Individual investors who are counting on their portfolios for long term income needs will be best served by learning how to pick a path away from the herd.

There are two themes in play that make it difficult for investors to realize success. The first is the short term focus of the financial news industry. That group focuses on providing entertaining news bites based on data points that change every day. It is a good idea to remember that what you see or read in the financial news is much more about the entertainment part of infotainment than it is about useful information.

The second factor that effects investors are the challenges faced by financial advisors. The typical financial advisor (I know there are exceptions) has a lot on his or her plate besides researching individual investments to discover the very best investments for each individual client. A common practice for full service investment firms is to put client money into portfolios made up of a selection of ETFs that are expected to meet a client’s stated investment goals.

Consider the case of investors who want to draw an income from their portfolio. With this goal, an investor would likely see several popular dividend income ETFs in a portfolio put together by a financial advice firm. Here is a list of those popular income ETFs and their current yields:

• Vanguard REIT Index Fund (NYSE: VNQ) with $35 billion in assets. Current effective yield: 3.86%.
• Utilities SPDR ETF (NYSE: XLU) is the largest utilities ETF with $8 billion in assets. Current yield: 3.07%.
• iShares Select Dividend ETF (NYSE: DVY) is a common stock ETF which as $17 billion in assets. DVY yields 3.1%.
• Vanguard High Dividend Yield ETF (NYSE: VYM) is another stock ETF focused on high-yield common stock shares. VYM has $29 billion in assets. The fund has a current SEC yield of 3.06%.

As you can see, a strategy of using popular income stock ETFs to build a portfolio with produce an average dividend income yield of 3.3%. That means an investor would get just $33,000 per year in income off a $1 million portfolio. I am pretty sure someone living off a million-dollar portfolio would like to receive quite a bit more than $2,750 per month.

The alternate solution for more income is to own a portfolio of individual stocks. There are hundreds of stocks with yields of 6%, 8%, and up into the teens. For my Dividend Hunter service, the primary focus is on the safety of the dividend payments. Yet the current recommended stocks list has an average yield of 8.0%. To illustrate, here is a list of five stocks that are diversified across different financial sectors with very attractive yields:

• Reaves Utility Income Fund (NYSE: UTG) is a utilities sector closed end fund that currently yields 6.1%.
• Hercules Capital Inc (NYSE: HTGC) is a business development company providing capital to growing technology companies. HTGC yields 9.7%.
• Macquarie Infrastructure Corp (NYSE: MIC) owns energy product terminals, power generation facilities and private aviation fixed base operations. This stock yields 7.8%.
• Starwood Property Trust (NYSE: STWD) is a mortgage lender for commercial properties and yields 8.8%.
• InfraCap REIT Preferred ETF (NYSE: PFFR) is a new to the market ETF that only owns preferred shares of equity (property owning) REITs. The preferred shares have a higher safety level when compared to the bulk of the preferred shares market which are issued by lending institutions. PFFR yields 5.6%.

With just five stocks, you have a decently diversified portfolio and an average yield of 7.5%. That is double the average yield of the income focused ETF list above. I do recommend that investors own about 20 stocks for adequate diversification, but the list above gives you a graphic example of how if you learn about income stocks on your own, you can literally double the dividend income you earn off your investment portfolio.

Individual high yield stocks should be the cornerstone of your income portfolio. And these are the kinds of stocks my Dividend Hunter readers are using to build their own income streams… some of them quite massive.  These stocks are part of my new income system called the Monthly Dividend Paycheck Calendar. It’s set up so that by following along you could see extra income of as much as $40,000 or more every year… for the rest of your life.

Most investors with $500,000 in their portfolios think they don’t have enough money to retire on.

They do – they just need to do two things with their “buy and hope” portfolios to turn them into $3,279 monthly income streams (or much more):

1. Sell everything – including the 2%, 3% and even 4% payers that simply don’t yield enough to matter. And,
2. Buy my 8 favorite monthly dividend payers.

The result? $3,279.69 in monthly income every month (from an average 7.6% annual yield, paid every 30 days). Withupside on your initial $500,000 to boot!

And this strategy isn’t capped at $500,000. If you’ve saved a million (or even two), you can just buy more of my elite eight monthly payers and boost your passive income to $6,349 or even $12,698 per month.

Though if you’re a billionaire, sorry, you are out of luck. These Goldilocks payers won’t be able to absorb all of your cash. With total market caps around $1 billion or $2 billion, these vehicles are too small for institutional money.

Which is perfect for humble contrarians like you and me. This ceiling has created inefficiencies that we can take advantage of. After all, in a completely efficient market, we’d have to make a choice between dividends and upside. Here, though, we get both.

Heck, This Grandma Makes $387,000 Last Forever

Recently I was chatting with a reader of mine who manages money for a select group of clients. He’s using my No Withdrawal Portfolio to make a client’s modest savings – a nice grandmother with $387,000 – last longer than she ever dreamed:

“She brought me $387,000,” he said. “And wants to take out $3,000 per month for ten years.”

“Well she’s already withdrawn money for eight months (at $3,000 per month) and her balance has actually grown to $397,000. If the portfolio continues yielding 7% per year plus 2% per year in capital gains, and she withdraws $3,000 per month, it will pay my fees and still last her 27 years!”

Now many retirement experts pitch real estate as the best way to bank monthly income. But this grandma isn’t hustling to collect rent checks, or fix broken light bulbs. She’s simply collecting her “dividend pension” every month, which is 100% funded by her stocks and funds.

Actually her monthly salary is more than 100% financed – which is why her portfolio has grown by $10,000 as she’s withdrawn $3,000 per month.

How is This Possible? With “B-List” Monthly Payers Like These

Apple Hospitality REIT (APLE)
Dividend Yield: 6.2%

I wonder how many investors researching Apple (AAPL) have accidentally come across this lesser-known real estate investment trust, only to quickly punch in the correct ticker and get back to reading about iPhones.

Anyone who had missed out on a gem.

Apple Hospitality REIT (APLE) owns 236 hotels across 33 states for a capacity of roughly 30,000 guestrooms. The REIT’s properties are spread between two upscale hotel families – Hilton (HLT) and Marriott (MAR) – which includes their namesake brands, as well as the likes of Fairfield Inn, Embassy Suites and SpringHill Suites.

APLE has delivered an impressive growth story over the years, ballooning its top line from less than $400 million in 2013 to more than $1 billion last year. However, while the company has been rapidly expanding, management is fiscally responsible and has given the dividend a wide safety net.

Through the first six months of 2017, the company posted 90 cents per share in modified funds from operations (MFFO) – a tweaked version of FFO, which itself is an important gauge of a REIT’s operational performance and dividend health – against six dividends of 10 cents each. That equates to a payout ratio of just 67%, meaning it would take a catastrophe to keep Apple Hospitality from ponying up what it owes shareholders.

You Won’t Have to Worry About Apple Hospitality’s (APLE) Payout

Global Net Lease (GNL)
Dividend Yield: 9.6%

Global Net Lease (GNL) would seem to be a prime monthly dividend payer for several reasons.

For one, GNL is a “triple-net lease” REIT. Unlike many REITs that take responsibility for things such as taxes, insurance and maintenance, triple-net leasers instead push all those expenses onto the tenants. The tradeoff here is that they don’t charge lessees as much, but what they do bring in should be much more predictable.

GNL also has a couple other plusses, such as international diversity – it owns commercial properties not just in the U.S., but also the U.K., Germany and a few other European countries. Moreover, it doles out nearly 10% in dividends at the moment. And better still, it’s growing; Q2’s revenues, for instance, soared by more than 14% year-over-year.

However, Global Net Lease is externally managed, which requires it to pay a great many fees for property management and other services – fees that cramp the company’s funds from operations to a dangerous extent. GNL paid out 97% of its adjusted funds from operations (AFFO) as dividends last year, and through six months of 2017, this REIT has actually paid out a little more than its total AFFO.

Worse, GNL investors have watched shares decline 5% year-to-date amid a broad up-market, eating up much of their gains from income.

Global Net Lease’s (GNL) Dividend Is Merely Subsidizing Your Losses

EPR Properties (EPR)
Dividend Yield: 5.8%

EPR Properties (EPR) is a play on one of my favorite themes of the past few years: the “experience economy.”

In short, people have started to put less value in merely amassing things, stuff and junk, and instead are increasingly spending their money doing things. That – along with the rise of Amazon.com (AMZN) and other e-commerce operators – have torn a hole through a number of retail REITs – but has benefitted a handful of properly positioned companies, including EPR.

Do you go to the movies? Ski? Have you ever spent a few hour in one of those state-of-the-art TopGolf driving ranges, complete with high-tech games and swanky bars? If so, chances are you’ve helped pad the pockets of EPR, which boasts 378 properties across the U.S.

That said, EPR is much more than entertainment – it also holds properties used for things such as public charter schools and early childhood education centers.

This extremely diversified REIT delivers a monthly payout that just got more than 6% sweeter earlier this year. Better still, the dividend is just 82% of AFFO, so EPR has plenty of ability to meet its obligation.

EPR Properties (EPR) IS Part of a New Generation of High-Performance REITs 

SPDR Barclays High Yield Bond ETF (JNK)
SEC Yield: 5.7%

It’s not widely practiced, but a few exchange-traded funds (ETFs) do dole out income monthly instead of quarterly. Better still, some of these monthly ETF payers even pay a fairly consistent amount of income every month.

The SPDR Barclays High Yield Bond ETF (JNK) does just enough to qualify, and in fact is a generally popular ETF. But I say stay away.

The JNK is a portfolio of nearly a thousand different junk issues – corporate bonds that are below investment grade, which means they have a higher risk of default, but also means that they have to yield more to compensate for that risk. Because SPDR’s junk ETF is so diversified (and so cheap), though, it has become a very common way for investors to gain exposure to this high-income bond class.

However, the JNK doesn’t hold a candle to a number of junk-focused closed-end funds (CEFs).

SPDR’s JNK Isn’t Junk, But It’s No Treasure, Either

These funds tend to charge more in expenses because of their active management, and they’re not nearly as talked about, but on average they offer much higher yields and have delivered much better performance than this merely “OK” exchange-traded fund.

Don’t buy into JNK’s junky payouts.

Please don't make this huge dividend mistake... If you are currently investing in dividend stocks – or even if you think you MIGHT invest in any dividend stocks over the next several months – then please take a few minutes to read this urgent new report. Not only could it prevent you from making a huge mistake related to income investing, it could also help you earn 12% a year from here on out! Click here to get the full story right away. 

Source: Contrarian Outlook

Quarterly earnings release time is the real news make or break time for most publicly traded companies. For investors in many publicly traded companies, these once-every-three months information dumps are the only time actual business results can be reviewed and analyzed. All the stuff you read in the 90 days between release dates are just speculations, projections and guesses. When the actual earnings numbers come out, the market often is not kind to share prices when the earnings report or management statements include bad news or negative business projections.

If you regularly follow how a company’s business operates, it is possible to get an idea what may come out in the next earnings reports. With some companies, the economic conditions in their business sectors will provide a preview of what may happen when earnings are released. For example, energy companies are affected by changing values for crude oil, natural gas and fuels, depending on what they do in the broader energy market. With other companies the potential benefits and dangers are subtler, and unless you follow the companies very closely, you could get blindsided by a negative earnings report.

High yield shares are especially subject to falling share prices if the market reads the financial reports and decides there is potential for a dividend reduction. Nothing scares the market more than the fear of a dividend cut from a big dividend stock. Here are three high-yield stocks with significant probability of a negative earnings surprise.

Ship Finance International (NYSE: SFL) owns a diverse fleet of commercial vessels. These ships are leased on long term contracts to shipping operators. Ship Finance gets a significant portion of its revenue from Seadrill Limited (NYSE: SDRL) which is going through a bankruptcy like reorganization. Ship Finance has worked out a new payment scheme with Seadrill, and in late August the SFL dividend was reduced by 22%. Contrary to what you would expect, after the initial price decline following the dividend announcement, the SFL share price has gained over 14%. I think the market is wrong about Ship Finance doing better after the dividend cut. I reviewed the company’s two must recent earnings reports and there are negative headwinds in several of the shipping sectors. I recommend against holding SFL shares through the earnings release in late November.

Annaly Capital Management, Inc. (NYSE: NLY) is a high-yield, agency mortgage-backed securities (MBS) owning REIT. In its 2017 first quarter earnings report the company owned $74 billion worth of agency MBS. The company owns $10 billion of other assets, including $5 billion of commercial property mortgages. This large pile of assets is held aloft by a total of $72 billion of debt. In the quarter, Annaly reported an average asset yield of 2.93% and an interest cost of 1.74% leaving a net spread of 1.19%. This spread is down from the second quarter and almost half of the 2.28% spread reported in the first quarter of 2016. Long term rates as indicated by the 10-year Treasury bond remain stubbornly in the 2.25 to 2.3% range. The Fed plans to continue to increase short term rates. Last quarter, NLY just covered the $0.30 per share dividend. If the company does not cover the dividend this quarter, the share price will fall. This company’s profits are being tightly squeezed and the next Fed rate increase is going to significantly tighten the noose.

KKR Real Estate Finance Trust Inc. (NYSE: KREF) is a very new commercial mortgage REIT. The company came to market with a May 4 IPO. The shares were priced at $20.50, and now, are trading at $21.35. The company had $838 million dollars of committed capital at the end of 2016. The IPO raised another $200 million, which went into the KREF asset base. The prospectus lists a book value per share of $19.91 following the IPO. The public float after the IPO is 21.5% of the total shares. As of March 31, 2017, the company had originated $1.08 billion dollars of targeted assets. These asset types are senior real estate loans, mezzanine loans, and commercial mortgage backed securities (CMBS) “B pieces”. The third quarter earnings report will be KREF’s releasing of its first full quarter results. The danger with this stock is that it appears to be overpriced with a current 6.9% yield. Other, much larger, more established commercial mortgage REITs yield 7.9 to 8.8%. If KREF does not come out with very spectacular earnings then I expect that the market will start to price this stock like its peers, which means a 14% to 20% share price decline.

SFL, NLY, and KREF are the types of investments that I help my Dividend Hunter readers avoid. Nothing will damage your income portfolio like a high yield stock that cuts its dividend. Instead, my readers are holding onto quality high yield stocks collect the dividends every month as part of a new income system called the Monthly Dividend Paycheck Calendar. It’s currently set to pay out over $40,000 a year in extra income and has an important action date right around the corner.

I’m going to get straight to brass tacks. Let’s discuss 2 closed-end funds with up to 18% upside in the next 12 months,plus yields up to 5.8%. Both are leading a blockbuster trend almost everyone has missed.

I say “almost” because if you’re a canny contrarian (and if you’re reading this I’m betting you are), you probably know what I’m going to say.

I’m talking about the quiet rebound in actively managed funds (that is, funds with real humans in charge), including CEFs.

So far this year, more than half of active managers are beating their benchmarks. And when human stock pickers take the lead, they keep it, like they did from 2001 to 2011.

This is where our opportunity lies, because the first-level crowd is running in the opposite direction! In the first seven months of 2017, $272 billion flowed into ETFs, almost matching the $287 billion in all of last year.

That means it’s time for us to snap up some disrespected high-yield CEFs. To help you do just that, I’ve taken the 2 powerhouses I mentioned off the top and put them toe-to-toe with their “dumb” ETF cousins.

Round 1: Value-Fund Smackdown

The Boulder Growth and Income Fund (BIF) stands out for one figure: 15.1%, one of the widest discounts to net asset value (NAV) in the whole CEF space.

Translation: you’re paying just $0.85 for every dollar of assets here!

If this discount window snapped shut (and that’s being conservative; this fund has traded at premiums up to 20% in the past decade), the stock would soar 18%!

That kind of gain would turn ETF investors green with envy, because their favorite funds never sport such markdowns.

Consider the iShares S&P 500 Value ETF (IVE), which, like BIF, focuses on undervalued large cap stocks. IVE’s discount or premium never exceeds 1%.

One Chart You’ll Never See in CEFs

Both funds hold Warren Buffett’s Berkshire Hathaway (BRK.A, BRK.B), though BIF, in a bid to emulate the value sleuth himself, holds a much bigger stake, at 30% of the portfolio. JP Morgan Chase (JPM), Wells Fargo (WFC),Cisco Systems (CSCO) and Chevron (CVX) also show up in both funds.

By now you’re probably wondering what the difference is.

Simple: performance—and you can thank BIF’s human managers, Stewart Horejsi, Brendon Fischer and Joel Looney, for that.

Even with the fund’s 1.37% fee (compared to 0.18% for IVE), it’s beaten its passive cousin (with dividends included) both over the last five years and since IVE’s inception on May 22, 2000:

BIF: The Better Bargain Hunter

The dividend is lower than you get from most CEFs, at 3.8% but it crushes IVE’s 2.2%. That conservative yield also means the payout is safe and poised to grow.

And if you’re worried that rising interest rates will hurt CEFs (a common concern that, happily, has been disproven time and again), BIF gives you one more layer of security: it barely uses any leverage (just 3.98% of the portfolio), so you won’t have to worry about higher borrowing costs killing your returns.

The bottom line? If you want a fund to buy and hold forever, BIF—not its low-fee colleague—should be high on your list.

Round 2: Battle of the Yield Plays

For one-stop dividend-stock shopping, the Vanguard High Dividend Yield ETF (VYM) is a top choice for many folks.

The reasons are obvious: Vanguard is a trusted name in ETFs; the fund holds large cap stocks like Microsoft (MSFT), Johnson & Johnson (JNJ) and AT&T (T); it has a blink-and-you’ll-miss-it 0.8% expense ratio; and it offers a 3.0% yield—50% more than the S&P 500 average!

VYM’s Hoard of Household Names

Source: The Vanguard Group

That’s good enough for most folks.

Trouble is, if you stop here and click the “buy” button, you’re missing out on a CEF that’s a far better buy: the Gabelli Dividend & Income Trust (GDV).

Look at the gain manager Mario Gabelli, another celebrated value hound, has steered GDV to in the last decade:

Active Management Proves Its Mettle (Again)

Even if the above results flipped, GDV would still win in my book, because its higher dividend—a 5.8% yield as I write—means a big chunk of its return was in cash.

And like our two value-stock funds, GDV and VYM look similar when you open the hood, including the size of their portfolios, with GDV holding 439 stocks and VYM with 406.

The portfolios’ sector allocations are also mirror reflections: GDV has 18.8% of its assets in financials vs. 13.4% for VYM, and there’s less focus on energy (as you’d expect from a dividend fund), at 8.9% for VYM and 5.4% for GDV.

Source: Gabelli Funds

So why does GDV fly under the radar?

Same reason BIF does: fees, which come in at 1.4%, or almost 18 times (!) more than VYM. (If you haven’t read it yet, check out my colleague Michael Foster’s takedown of the common “wisdom” on fund fees here.)

You can probably guess where I’m going next. Like the three-man crew at BIF, Gabelli is more than earning his keep: the return I showed you above (and all the returns I show you) is net of fees. And keep in mind that those fees come out of GDV itself—the fund doesn’t send you a bill.

Finally, if you think this fund will stumble as rates head higher, think again.

Look at the last rising-rate period, from July 2004 through June 2006, when Fed Chair Alan Greenspan raised the federal funds rate from 1% to 5.25. An earthquake.

How did GDV do?

Just fine.

Proof Positive: GDV Loves Rising Rates

That record, plus the fund’s high yield and 6.4% discount to NAV, make it a far better play than its “dumb” cousin VYM now.

Revealed: My 8% “No-Withdrawal” Retirement Portfolio

I know that a completely safe 8% yield may sound like a pipe dream. But just like ridiculous discounts that turn into premiums overnight (I’m looking at you, BIF), gaudy 8% to 11% yields are common in the CEF world!

In fact, two of the three CEFs in my 8% No-Withdrawal Retirement Portfolio pay even more—and the entire portfolio itself, which is made up of 6 investments in all (CEFs, REITs and preferred shares) hands you a safe—and growing—8% on average.

Plus the instant diversification you’re getting here makes this “no-drama” portfolio far safer than what the strategy too many folks rely on: pile into a high yielder and hope for the best.

Here’s what you get from the 3 powerhouse CEFs in this unique portfolio:

• My No. 1 CEF Pick lets you hire one of the brightest investment minds in the business for almost nothing! He also pays us every single month (instead of every quarter)—and our yield works out to a rock-solid 8.4%.
• My No. 2 CEF Pick yields 8.1% and has paid its current distribution every single month since 2002! This is one of the most reliable dividends out there, and the fund’s share buybacks give it extra kick by slowly grinding away at its unusual discount. Buy now.
• My No. 3 CEF Pick pays 6.0% today but is set to explode in the next 12 months thanks to its ridiculous 9% discount to NAV. This one has motored through crisis after crisis in its 20+ years of existence and has still left the broader market in the dust.

Editor's Note: The stock market is way up – and that’s terrible news for us dividend investors. Yields haven’t been this low in decades! But there are still plenty of great opportunities to secure meaningful income if you know where to look. Brett Owens' latest report reveals how you can easily (and safely) rake in 8%+ dividends and never worry about drawing down your capital again. Click here for full details!

Source: Contrarian Outlook 

“Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.”

Albert Einstein

I wonder what Einstein would have said in a world where bank savings products pay less than 1%, the five-year Treasury bond yields 1.9% and the S&P 500 dividend yield also sits at 1.95%? These historically low investment yields take away the power of compound investment growth through the reinvestment of interest or dividend earnings. To benefit from the eighth wonder of the world, you need to find high yield investments that pay sustainable, well above average dividend yields.

The InfraCap MLP ETF (NYSE: AMZA) sports a hard to believe 23% dividend yield. There is a range of reasons why that yield is so high, but at this point the quarterly dividends are sustainable at the current or close to the current level. If that is the case, AMZA is an investment that you can use to compound income and share count growth by over 5% every quarter.

For example, if 500 shares of AMZA were purchased in March 2015 (just before the energy sector crash) and you reinvested dividends every quarter here is where you would sit today. Your quarterly dividend earnings would have grown by 57%, from $255 to $400. Shares owned would be up 62% to 813. However, AMZA is an MLP focused ETF, and the MLPs crashed right along with the energy sector in 2015 as crude oil dropped from around $100 to less than $30 per barrel in 2016 before rebounding to where it’s been lately hovering around $50. AMZA shares are valued at about half if what they were early in 2015.

But with a disciplined dividend investment strategy that share price drop is not necessarily a bad thing. In March 2013, when AMZA was $21 per share, the dividends from 500 shares purchased 12 additional shares each quarter. Now in the 2017 third quarter, the dividends on the 813 total shares own would buy 45 shares. Reinvesting as the share price has fallen has increased your share purchasing power by 275%. I know it feels like a twisted way of thinking to be benefitting by 275% from a share price that has dropped by about 50%.

The underlying MLP fundamentals make this strategy work. While stock market values have gone into a bear market, MLPs for the most part have been able to sustain and in many cases, grow distributions paid to investor. As a result, AMZA is earning the same cash income per share from its portfolio at $10 per share that it was at $21 per share. You’re just now able to buy it on sale.

The fund managers also sell call options to boost portfolio income. Call option income potential is generally better when volatility is high, as it has been for MLP values. The energy infrastructure sector did need to adjust for a lower crude oil price world and they have done so. I forecast that MLP distribution growth will start to accelerate, which will bring up individual MLP values and the AMZA share price. That process may take time, but remember that the plan is to reinvest the 5% dividend earned each quarter, so a slow recovery is not a problem.

If you want to build an income stream growing at 5% per quarter, 20% per year, buy AMZA shares and reinvest your dividends every quarter.

The Monthly Dividend Paycheck Calendar is set up to make sure you receive a minimum of 6 paychecks every month and in some months up to 14 paychecks from reliable high-yield stocks built to last a lifetime.

This unique tool will set you up to receive a more predictable dividend stock income stream that you can count on every month instead of just once a quarter like most other investors. Joining my calendar by Thursday, October 19th will give you the opportunity to claim an extra $1,820 in dividend payouts by October 27th.

The Calendar tells you when you need to own the stock, when to expect your next payout, and how much you can make from these low-risk, buy and hold stocks paying upwards of 12%, 13%, even 18%. I’ve done all the research and hard work, you just have to pick the stocks and how much you want to get paid.

Sometimes what looks like a great investment deal is just the opposite. I see many investors and financial writers who view stocks trading at a discount to book value as “good deals”. The reality is that these “good deals” are often a danger to your portfolio value. This especially applies to the business development company (BDC) sector.

The book or net asset value of a company is the assets owned minus debt divided by the number of shares outstanding. You can view it as the amount an investor would receive for each share if the company were to be liquidated. It is an understandable assumption that if a stock is trading at a discount to the net asset value, an investor picks up some “free” value by purchasing shares at less than the liquidation value. If you add in a high dividend yield, this type of stock looks like a winner. Yet several features of pass-through and the BDC business structures make this analysis a path to losing money on this type of stock.

Companies that use a pass-through business structure do not pay corporate income taxes in exchange for paying out the majority –usually 90%– of net income as dividends to investors. Since these companies have little or no retained income to fund growth, the usual practice is to pay for growth projects or acquisitions with a combination of issuing new equity and debt capital. A company with stock trading at a premium has a significant advantage when raising capital through additional stock issuance. For example, a company price at 1.2 times book value can buy $120 worth of assets for every $100 of new stock issue. For a company with stock trading at a discount, issuing new shares means the company will overpay for assets to grow the business. If the stock is at a 20% discount to NAV, using stock to raise capital means the company will pay $125 for $100 of asset growth.

BDCs face another challenge. A BDC must pay out at least 90% of the net interest income it earns as dividends and the BDC rules do not allow these companies to set up loan loss reserves. By law, BDCs make business loans to high-risk, non-public mid-sized corporations. Because of the types of lending clients it serves, a BDC cannot avoid loan losses. If the company does not have a growth plan, the asset base will steadily bleed off. Another rule limits debt to 50% of assets, so a BDC must issue stock, just to stay even.

For a BDC, having a stock that trades at a deep discount to NAV inevitably leads to a death spiral of declining interest income earnings and dividend reductions. It is very, very difficult for a BDC management team to stop the decline, as the dividend cuts lead to share price declines, which leads to a deeper discount to NAV. No matter what you may read, avoid any BDC trading at a significant discount to NAV or book value. Here are three you’ll want to avoid:

Prospect Capital Corporation (NASDAQ: PSEC) is one of the larger BDC’s with a $2.4 billion market cap. In August PSEC slashed its dividend by 28%. This was the second dividend reduction in the last two-and-a-half years. The stock trades at a 28% discount to NAV, so is well into the death spiral. Do not be tempted by the 10.8% yield.

Apollo Investment Corp. (NASDAQ: AINV) is a $1.4 billion market cap BDC. The company reduced its dividend by 25% in 2016. AINV trades at a 10% discount to NAV. The current yield is 10.0% and the company’s net investment income just covered the dividend for the 2017 second quarter.

Small cap BDC Medley Capital Corp (NYSE: MCC) may look attractive with its 11% yield. However, the stock is now trading at a 31% discount to book value. Earlier in 2017 Medley Capital was forced to cut its dividend by 27%. Shares fell 16% in on day and despite small bump in July they’ve continued to slide.

High-yields can look attractive in a low yield environment where none of the traditional safer investments like bonds and CDs pay anything near what we expect or need… especially if you’re looking to live off it for retirement money. That’s why it pays to look at closely at numbers like NAV and cash flow.

And I steer my readers clear of these stocks with our Monthly Dividend Paycheck Calendar system… a system that can help you catch up quickly if you think you’ve not saved enough for retirement and avoid the yield traps of the likes of the stocks above. The calendar shows you which stocks to pick, when to buy them, when you get paid your dividends and how much. All you have to do is buy the stocks you like and tell them where to send your dividend payments.

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When interest rates start to go up, investors worry about the value of their higher yield dividend stocks. A defense against higher interest rates is to own dividend stocks that will grow the dividend payments. The secret is to know which stocks will make a higher dividend announcement before the rest of the market finds out.

Many real estate investment trusts (REITs) pay attractive current yields and regularly increase their dividend rates. I maintain a database of about 140 REITs, out of which about 100 have histories of dividend growth. Most of these companies increase the quarterly dividend once a year, and then pay the new rate for the next four quarters. Even though individual REITs increase their dividends once a year, those announcements are spread across almost every month of the year. To capture those share price gains, you want to buy shares a few weeks to a month before the next dividend announcement is published. Now in mid-July, it is a great time to look at those REITs that should increase dividends in August. Here are four REITs from my database that historically have boosted their payouts in August.

Federal Realty Investment Trust (NYSE:FRT) is a $9 billion market cap REIT that owns, operates, and redevelops high quality retail real estate in the country’s best markets. FRT has increased its dividend for 49 consecutive years, the longest growth streak of any REIT. Over the last 10 years, the average annual dividend increase has been about 5%. Last year the dividend was increased by 4.3%. Based on management guidance, an increase close to the 5% annual average is in the cards for this year. The company announces its new dividend rate in early August. The ex-dividend date will be in mid-September with payment about a week later. The FRT share price is down by 22% over the last year. This is a very high-quality REIT currently on sale. The stock yields 3.1%.

Timberlands owner and wood products producer Weyerhaeuser Co (NYSE:WY) converted to REIT status in 2010. Since then the company has more than doubled its quarterly dividend rate. However, last year, the company did not increase the dividend. Weyerhaeuser completed a merger with Plum Creek Timber in February 2016, so it’s likely that the consolidation costs kept the company from announcing a higher dividend. Business results are off to a very strong start in 2017 compared to 2016. This points to a resumption of dividend growth this year. Historically, Weyerhaeuser announces a new dividend rate in the second half of August, with payment dates in September or November. The next dividend declaration date is August 24^th with the next payment dates on September 22^nd and December 15^th. WY yields 3.7%.

Eastgroup Properties Inc (NYSE:EGP) is a $2.8 billion market value REIT that focuses on development, acquisition and operation of industrial properties in major Sunbelt markets throughout the United States with an emphasis on the states of Florida, Texas, Arizona, California and North Carolina. The industrial properties segment is currently one of the best performing real estate sectors. The company has increased its dividend for 21 of the last 24 years, including the last five in a row. Last year the payout was increased by 3.3%. This year my forecast is for a 5% to 7% increase. The new dividend rate should be announced in late August or early September, with a mid-September ex-dividend date and end of the month payment date. EGP yields 3.0%.

Bonus Stock to Watch in Early August

Healthcare Trust of America, Inc. (NYSE: HTA) is a $5.8 billion REIT that acquires, owns and operates medical office buildings. The company reduced its dividend in 2012 and 2013, which was followed by small increases in each of the next three years. Last year the dividend was bumped up by 1.7%, double the increase of the previous year. In 2016, the funds available for distribution per share increased by 12%, and for the 2016 first quarter, FAD per share was up 8.8% compared to a year earlier. Management has been very conservative with the dividend growth, but this year’s dividend increase may be significantly greater than the change of the past two years. Last year the new dividend rate was announced in early August, with an end of September ex-dividend date and early October payment date.

Turning your retirement savings into a consistent stream of income is no easy task. You might spend hours researching what stocks to buy, only to end up with three seemingly attractive stocks like the three above.

Investors who own individual stocks like to watch the markets and financial news websites for new information about the stocks they own. With some companies, there is news every week or every few days, and this stream of information can drive share prices up and down.

The flip-flops are hard to predict and are mentally draining. Starwood Property Trust, Inc. (NYSE: STWD) is a company that does not get much financial press coverage – which is a good thing.

Starwood Property Trust is a finance real estate investment trust, also called a REIT. The company’s primary business is the origination of commercial property mortgage loans. The loans are then held in Starwood’s portfolio. The company also operates a commercial mortgage servicing arm and owns a small portfolio of commercial real estate properties.

The finance REIT universe consists of about 30 publicly traded companies. Most of them operate in the residential mortgage space. The most common business model is to own a highly leveraged portfolio of residential mortgage backed securities (MBS) with the goal of profiting from the interest rate spread between short-term borrowing costs and the rate paid on MBS. That model is very sensitive to changes in both short and long-term interest rates.

Investors familiar with the high yield residential MBS REITs may be surprised to learn that Starwood Property Trust is the third largest company by market cap in the sector. Only Annaly Capital Management, Inc. (NYSE: NLY) and AGNC Investment Corp (NASDAQ: AGNC) are valued higher than the STWD $5.7 billion market capitalization.

The larger finance REITs and many of the much smaller companies in the sector are the subjects of far more financial press coverage and analysis. The reason for the lack of news about Starwood Property Trust is that the company is a safe and steady cash flow generator. There are no risks in the Starwood balance sheet or income statement that would give a financial writer something interesting to dig into for an article. Safe and conservative doesn’t sell in the financial news world. It sounds pretty good for an individual investment portfolio.

There are no risks in the Starwood balance sheet or income statement that would give a financial writer something interesting to dig into for an article. Safe and conservative doesn’t sell in the financial news world, but it sounds pretty good for an individual investment portfolio.

Consider these facts about the Starwood Property Trust financials:

• STWD has a 1.4 times debt to equity balance sheet. The typical residential MBS REIT is leveraged 6 times or more to equity.
• In its commercial loan portfolio, STWD has a very conservative 63.3% loan-to-value. Starwood has never booked a commercial mortgage loss.
• With eight years as a public company, STWD has never reduced its dividend rate. The dividend has been increased several times in the company’s history. The current $0.48 per share quarterly payout has been in effect for three years. Most of the residential mortgage REITs have slashed dividends during the last three years.
• Starwood has been making selective commercial property acquisitions that enhance the long-term stability of the company’s revenue and free cash flow stream.

The bottom line is that Starwood Property Trust gets little financial news press because it is so well run that writers and analysts can’t find anything that would cause problems for the company. This is a dividend paying stock that will not fluctuate much in share price and will pay that attractive dividend quarter after quarter. With a current 8.7% yield, it is a good time to initiate or add to a position in STWD. I very much like the idea of earning near 9% without drama.

Turning your retirement savings into a consistent stream of income is no easy task. You might spend hours researching what stocks to buy, only to end up with more questions than answers.

There are thousands of stocks to choose from, but only a small percentage of that group are the right stocks for you to own. The best high-yield stocks need to have safe long-term businesses that print money every year no matter what the market does. Those are the only companies that can pay consistent dividends.

That’s a tall task for most companies, and unless you have a degree in finance or worked on Wall Street, picking the best companies to own, out of all of the other ones, is an extremely difficult task.

At the start of each new quarter, there is a group of companies that announce their next dividend payments well before the actual earnings results. I look forward to these press releases, as they are proof that my income stock portfolio is providing me with a “pay” increase every quarter.

My Dividend Hunter philosophy and investment strategies focus on building a dividend income stream. If your stocks pay stable and growing dividends, the share prices are not the focus. If dividends grow, the share prices must at some point follow.

Master limited partnerships (MLPs) are companies that provide infrastructure assets and services in the energy sector. The market often links MLP values with energy commodity prices, typically the value of crude oil. However, most MLPs have fee-based business models providing essential transport, storage, and terminal services to the full range of energy producers, processors, retailers and end users.

The best MLPs have business operations and client relationships that allow them to increase the distributions paid to investors every quarter. It is about the time in the new quarter that the dividend increase announcements start to hit my e-mail inbox. I look forward to reading about how much of a pay raise my income stocks are giving me every quarter.

We are still early in the distribution announcing season, but already there has been some strong growth numbers. Here are five companies with distributions rated at “No Risk of Distribution Cut” by MLPData.com (subscription required) and companies that investors can expect to continue their trajectories of dividend growth.

Magellan Midstream Partners, L.P. (NYSE: MMP)primarily provides refined energy products pipeline and terminal services. Magellan has now increased its distribution for 61 consecutive quarters. The new distribution is 2% higher than last quarter’s payout and up 9% compared to one year ago. MMP yields 4.95%.

Phillips 66 Partners LP (NYSE: PSXP) provides pipeline, storage and terminal services for its sponsor company, crude oil refiner Phillips 66 (NYSE: PSX). The new PSXP distribution is up 4.95% over last quarter and has been increased by 21.8% over the last year. The units yield 4.5%.

Valero Energy Partners LP (NYSE: VLP) is another refiner sponsored MLP, providing similar services to Valero Energy Corporation (NYSE: VLO). VLP just increased its dividend by 6.4% and the new rate is 24.6% higher than the rate paid a year ago. VLP yields 3.7%.

Antero Midstream Partners LP (NYSE: AM) provides natural gas gathering and water treatment services to its sponsor, Antero Resources (NYSE: AR), a natural gas exploration and production energy company. The AM distribution was just increased by 6.7% and is up 28% year-over-year. The units yield 3.7%

Tallgrass Energy Partners LP (NYSE: TEP) owns and operates both crude oil and natural gas interstate pipelines and the terminals where the oil and gas get on and off those pipelines. Since its 2013 IPO, Tallgrass Energy Partners has one of the strongest distribution growth records in the MLP space. This quarter the payout was increased 10.8% over the previous quarter. The distribution is up 22.5% over the last year. TEP yields 7.2%.

These growing distribution MLPs can be great buys when the market is slow to price in new distribution increases. Over the last few months, MLP values have been tracking down with crude oil. Yet the numbers above show that revenues and cash flow continue to grow. These MLPs report tax information on IRS Schedules K-1. These tax forms add some work at tax filing time and generally make these investments a poor fit for IRA and other tax advantaged accounts. I show my Dividend Hunter subscribers some comparable 1099 reporting alternative energy infrastructure investments that have great distribution growth and income potential.

Turning your retirement savings into a consistent stream of income is no easy task. You might spend hours researching what stocks to buy, only to end up with three seemingly attractive stocks like the three above.

There are thousands of stocks to choose from, but only a small percentage of that group are the right stocks for you to own. The best high-yield stocks need to have safe long-term businesses that print money every year no matter what the market does. Those are the only companies that can pay consistent dividends.

That’s a tall task for most companies, and unless you have a degree in finance or worked on Wall Street, picking the best companies to own, out of all of the other ones, is an extremely difficult task.